On January 28, the FTC announced that it banned an automotive marketing company and its owner from the auto industry for the next twenty years for allegedly engaging in unfair and deceptive practices in violation of the FTC Act and failing to comply with the Truth in Lending Act's (TILA) disclosure requirements. According to the FTC's opinion, the company sent mail advertisements directing consumers to visit auto sales websites, inaccurately suggesting that these websites were affiliated with a government COVID-19 stimulus program. Consumers also received direct mail advertisements from the company purportedly informing them that they had won specific and valuable cash prizes that could be collected upon visiting a car dealership. Once consumers visited the dealerships as directed, they learned that they had not won the prize listed in the mailings. The company was also found to violate TILA's requirements for advertising "closed-end credit" to prominently disclose key financing terms that consumers need to determine the true cost of the advertised car loans.
The FTC's unanimous order bans both the auto marketing company and its owner from advertising, selling, or leasing cars for the next twenty years. The FTC has also banned both the company and its owner from engaging in any material misrepresentations during the marketing of any other products or services in the future and from violating TILA's disclosure requirements. The company and its owner have petitioned the Fifth Circuit Court of Appeals for review of the FTC's opinion and order.
Putting it into Practice: FTC enforcement against this company comes as no surprise based on recent rulemaking aimed at combatting government and business impersonation fraud. This case also highlights the FTC's aggressive approach in dealing with deceptive advertising against a direct mail marketing company – rather than prohibiting the company from engaging in similar activities, the FTC altogether banned the company from the industry. Finally, this case highlights the FTC's willingness to target non-financial companies for violations of TILA and Regulation Z's disclosure requirements that have been traditionally reserved for consumer finance companies.
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